By Katie Lester of Colliers
Nashville’s economy experienced some of the healthiest growth in the nation in 2023, with a job growth rate of 3.7 percent, putting it among the top five of the largest 50 metros. Forecasted by Oxford Economics, overall jobs are projected to grow 1.2 percent in 2024 and by 0.8 percent per year in 2025 through 2028, outpacing the U.S. average of 0.5 percent.
Nashville also received high marks from the Urban Land Institute, ranking the “No. 1 Market to Watch” in its 2024 Emerging Trends in Real Estate report. This is the third consecutive year that Nashville has earned the top spot in this ranking, a true nod to the confidence and strength of Nashville’s commercial real estate market. The report credits Nashville and other “Supernova” cities as having above-average levels of economic diversity and high-wage jobs that attract investors’ appeal and confidence in sustaining high growth in the coming years.
These fundamentals have been a boon to the retail market and have helped attract new-to-market retail brands to Middle Tennessee. Most notably, after a multi-city, multi-state search over the course of two years, In-N-Out Burger picked Middle Tennessee to locate its Eastern Operations Hub, estimated to be 100,000 square feet of office space, with a projected 277 jobs to be created, in addition to future restaurant openings in the region. This remarkable deal made national headlines, resulting in the company’s first presence east of the Mississippi River.
Landing such an iconic brand reinforces Middle Tennessee’s reputation of being a top city for attracting national retail brands — a true reflection of tremendous growth, a business-friendly environment and the vibrancy of the metro.
At the macro level, Nashville has these great fundamentals that have, in turn, attracted retailers to the region. It has its own unique brand that attracts people and businesses. It is nicknamed “Music City” due to the high concentration of musicians and creatives. It was crowned the “It City” by The New York Times in 2013, to name a few, and demand for retail space has kept Nashville’s market-wide vacancy rate under 5 percent since second-quarter 2021.
Pocket neighborhoods
Within the more prominent “brand” of Music City, there is a growing number of retail pockets — or neighborhoods — that are emerging throughout the city with their own identity and culture, and developers and owners are increasingly intentional about retail curation in these areas. Though neighborhood pockets with their own atmosphere are nothing new, what sets Nashville apart is that these areas are thriving in satisfying the local community’s needs while entertaining and attracting tourists. Competition for these highly sought-after areas is robust, which is driving construction in each area where development has yet to be prevalent historically.
To understand the neighborhood pockets, one must first examine the entertainment district. Nashville’s booming tourism industry helped catapult Nashville’s post-pandemic recovery, as its downtown earned the top spot in the nation, ranking as the No. 1 city in “post-Covid visitor recovery rate” reported by the Center City District Philadelphia’s Downtowns Rebound 2023 report.
International country music celebrities continue to open bars along Lower Broadway that attract tourists from all over the globe. Huge names, including Blake Shelton, Jason Aldean, Kid Rock, Miranda Lambert, Luke Bryan, and most recently, Garth Brooks, have opened bars along Lower Broadway in recent years. Retailers continue to flock to the urban retail spaces, as the Downtown Nashville Partnership reported 47 new retail and restaurant openings in 2023, and 48 retail and restaurants have announced plans to open in 2024.
The Wedgewood-Houston neighborhood is two miles south of downtown, a creative community with a lively arts scene, trendy restaurants, breweries and music publishing houses. The proximity to downtown makes it a draw for tourists, and its unique mix of retail amenities gives the area its own distinct identity that appeals to the local community.
The area has significantly revitalized, attracting entrepreneurs, artisans, coffee shops and creative office users in the last five years. This neighborhood’s location and creative vibe recently landed national brands, including Apple Music, Live Nation and SoHo House. Developers are continuing to invest in Wedgewood-Houston, with the delivery of The Finery, a mixed-use development with 200,000 square feet of creative office, carefully curated retail totaling 50,000 square feet and 383 residential units. Developed by Houston-based Hines, this is the newest project delivered in the area.
Another neighborhood becoming a destination with its distinctive brand is 12South, an area donned with an eclectic mix of retail, including boutique fashion stores, coffee shops and restaurants. The retail properties are a mix of historic homes and new construction, with 22 murals interspersed throughout the properties. 12South is a shopping destination, as retail options include 36 national brands and 12 local brands. 12South really came onto the radar for tourists following the location of Reese Witherspoon’s Draper James store, and demand for retail space has taken off.
Currently, 12South commands one of the highest retail rates, with average asking rents between $80 to $150 per square foot, depending on size and condition. Ashwood 12South is the most prominent option for retail looking to locate in this area, comprising 72,000 square feet of offices and 44,500 square feet of retail space.
Like many cities, Nashville is a large town comprising smaller neighborhoods, which in turn have their own thriving pockets of carefully curated retail space. What started out as neighborhoods with only a few retail options are now retail hotspots, but these hotspots have maintained that local community feel, attracting tourists and the locals alike. The award-winning chefs, local artisans, entrepreneurs, business owners and thoughtfulness behind intentionally curated retail are exceptional for Nashville and are the drivers for this city’s success in recent years.
— Katie Lester, Principal and Executive Vice President | Director of Research, Colliers. This article was originally published in the February 2024 issue of Southeast Real Estate Business.